21 Oct MEC, ACA, and Me: Answers for the Staffing Industry
What is a MEC plan and Will It Protect My Company Against ACA Penalties?
As January 2016 approaches so do the final phases of implementation for the Affordable Care Act. Many employers – especially those who utilize alternative employment arrangements like staffing agencies and businesses that uses temporary workers – are still struggling to understand just who has to provide insurance, which employees qualify, and how much coverage they’re required to provide in order to avoid penalties.
Barrow Group, LLC’s staffing industry experts are here to help you find the answers to some of those questions…
Beginning in January 2016, all employers with 50 or more full-time employees must provide Minimum Essential Coverage to all full-time employees and their dependents. A full-time employee is defined as anyone who works 30 or more hours per week which equates to 130 hours per month according to the federal government. However, the calculation to determine the number of Full-Time Equivalent employees (FTEs) is slightly more complicated. You can use this FTE Calculator to determine how many FTEs your company has. This determination can be tricky for staffing agencies with a fluctuating workforce.
Many staffing agencies use a “look-back measurement period” to determine full-time status for their employees rather than simply looking at the number of hours worked per month because of the varying nature of work schedules in the temporary workforce. The “look back” method takes an average of an employee’s hours over a 3-12 month period of employment to determine if they are, indeed, a full-time (equivalent) employee. Of course, staffing agencies and their clients are only allowed to use this method with variable hour, seasonal, and part-time employees. Keep in mind, however, that just because a worker is temporary does not mean they are automatically a variable-hour employee for ACA purposes. If you hire a temporary worker and know that they will be working 30 hours per week, you need to go ahead and offer them a MEC plan that begins no later than the 90th day of employment. Barrow Group typically recommends having coverage begin on the 60th day to avoid any problems.
So, what exactly is a MEC plan?
MEC stands for “Minimum Essential Coverage.” A MEC plan is the basic coverage that an individual must have to comply with the ACA’s individual mandate and avoid paying the individual mandate tax and that employers must provide in order to avoid paying the large employer mandate penalty.
Large employers (50 or more employees) who fail to offer coverage to their employees, face penalties of $2,084 per full-time employee (minus the first 30). For example, if you only have 50 employees, your risk for not providing a MEC healthcare plan is $41,680 – money simply thrown away on tax penalties. Remember, that the cost of securing MEC coverage for your employees is a tax deductible expense.
Offering a MEC plan to your temporary staffing employees does protect your staffing agency against the employer mandate, however, you still need to comply with “Minimum Value” and “Affordability” guidelines in order to avoid the secondary penalty.
The “Minimum Value” (MV) standard means that the coverage provided pays at least 60% of the actuarial value of allowed benefits under the plan. “Affordability” means that the employee’s cost for self-only coverage cannot total more than 9.5% of the employee’s total household income.
Failure to comply with the Minimum Value or Affordability standards can result in fines of $3,126 per employee who accesses government subsidies to purchase their own insurance plan elsewhere.
Evaluating such a risk is tricky. Let the trusted staffing industry experts at Barrow Group help you evaluate all of your options for providing MEC coverage that meets both MV and Affordability standards to your temporary staffing employees.
We’re here to help!